What Is a Growth and Income Mutual Fund?

by Helen Akers

A mutual fund is a mix of investments, including bonds and stocks.

Navigating through the numerous mutual fund options may seem perplexing. Many 401(k) and individual retirement accounts offer different types of mutual funds. Before you decide which funds to invest in, you'll want to consider your financial goals. You'll want to make sure that your goals match those of the funds you invest in. If you have 30 or more years until retirement, you'll probably be able to tolerate more risk. You're also more likely to be looking for growth rather than stability. A growth and income mutual fund can provide long-term growth in the value of your investment.

Growth

A growth and mutual fund seeks an increase in value over time. Many of these funds invest in stocks of companies that have a history of strong growth, according to American Funds. A growth and mutual fund may contain a mix of both stocks and bonds. Some of the stocks that a growth and mutual fund contains may show the potential for growth, according to Fidelity. A growth and income mutual fund is different from a growth mutual fund. Funds that strictly focus on growth tend to not include bonds or stocks that pay dividends.

Income

Regular current income is another goal of a growth and income mutual fund. By choosing stocks that have a history of paying dividends, a growth and income mutual fund provides you with steady payments. Dividends are payments that a company gives to its stockholders when it makes a profit. If you're seeking an immediate return on your investment or need consistent supplemental income, you may find a growth and income mutual fund to be beneficial.

Risk

Growth and income mutual funds tend to carry more risk than fixed-income funds. Higher potential growth rates usually mean more risk. In order to achieve an increase in value, growth and income mutual funds contain a larger proportion of stocks than bonds. Stocks are subject to a greater potential for changes in market value than bonds. Some funds invest in the stocks of foreign and international companies, which increases both risk and potential long-term growth.

Returns

The average return on growth and income mutual funds may vary. You'll want to check the fund's average return percentages. Most funds will provide you with the returns for one year, three years, five years and 10 years. A fund may list its lifetime return, which is the fund's return since it began trading. If you're seeking the maximum amount of growth over the longest period, you'll want to put more weight on the 10-year and lifetime returns. A 10-year return of 11.0 percent means the fund has grown in value by 11 percent over the course of 10 years.

About the Author

Helen Akers specializes in business and technology topics. She has professional experience in business-to-business sales, technical support, and management. Akers holds a Master of Business Administration with a marketing concentration from Devry University's Keller Graduate School of Management and a Master of Fine Arts in creative writing from Antioch University Los Angeles.